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What Banks have to Offer

What Banks have to Offer. Applied Financial Education – Chapter 7. Role of Banks. Banks are in business to earn a profit Most income earned through interest Interest rates depositors receive are lower than the rates banks charge borrowers

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What Banks have to Offer

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  1. What Banks have to Offer Applied Financial Education – Chapter 7

  2. Role of Banks • Banks are in business to earn a profit • Most income earned through interest • Interest rates depositors receive are lower than the rates banks charge borrowers • This income allows banks to pay their costs and earn a profit • Other sources of income = fees • Banks provide security • Safe from theft • Protects money’s purchasing power (unless rate of inflation is higher than current interest rate) • Banks are regulated by government • Most are insured – • FDIC – Federal Deposit Insurance Corporation ($100,000) • NCUA – National Credit Union Association

  3. Role of Banks • Banks make borrowing easier • Equipped to evaluate borrowers • Also help state and local governments borrow • Money & Financial Transactions • How would you buy things without money? • Barter = trading goods and services without using money • What happens if the things you have to trade don’t have the same value? • Money allows you to compare the value of one product to the value of another

  4. Banking Diagram • Using technology of you choosing, create a diagram or flowchart to show how banking works, including the following: • How banks earn money • How banks help consumers • The role of interest (both for credit and savings) • The role of the Federal Reserve • How this may be different for a credit union • For any of the above that cannot be identified in your diagram, provide a written explanation then regarding that information. Be ready to share these with the class tomorrow.

  5. Types of Money • Currency • Paper money and coins used for financial transactions • Check • Order to a bank to pay a specified sum to the person or business named on the check (payee) • Money is not withdrawn from your account until the payee cashes the check

  6. Advantages of Using Checks • Safety • If payee is identified, no one else can cash the check if lost or stolen • If someone does cash it illegally, you as the check writer are not responsible; the bank suffers the loss instead • Checks that are lost or stolen can be replaced; currency is not! • Convenience • Easier to make larger purchases • Most business and government transactions involve enormous amounts of money – most payments made with checks • Allow you to send money by mail • Records of your transactions • Statement = a written record of all your transactions • Also have digital images of your checks available online

  7. Application • How many banking institutions did you find within 10 miles of your home? • Choose THREE banks and ONE credit union and research the following information: • Types of checking accounts available • Fees attached to each account • Hours and ATM availability • Guidelines for each account available – fees? Minimum balance? Free checks? • Select ONE account, providing FIVE (5) solid reasons why you chose that bank and that account. • Extra Credit – Open a checking or savings account by March 14!

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